Google, Facebook CEOs sign off on illegal ad deal

Sundar Pichai and  Mark Zuckerberg, the CEOs of Google and Facebook respectively, allegedly signed off a secret and illegal ad deal according to BuzzFeed. As a result, Facebook was given "information, speed, and other advantages" during auctions for ad space run by Google. Yesterday, unredacted court documents revealed the involvement of the two CEOs in the deal.

The documents are from a complaint originated by Texas and other states in December 2020 that accused Google of  committing "false, deceptive, or misleading acts" while running its buy-and-sell auction system for digital ads. The complaint states that Google teamed up with Facebook in 2018 that Google called "Jedi Blue," a name that riffs on the Star Wars movie franchise.

Facebook unnerved Google by promoting a method called "header bidding" that was a threat to Google. With "header bidding," publishers offer inventory to multiple ad exchanges before calling their ad servers. By hiking demand for limited inventory, publishers make more money.

According to the complaint that was released on Friday, "Google understood the severity of the threat to its position if Facebook were to enter the market and support header bidding. To diffuse this threat, Google made overtures to Facebook." The deal was made at the highest level of both companies and the complaint notes that "Google CEO Sundar Pichai also personally signed off on the terms of the deal."

The complaint also revealed that Facebook CEO Zuckerberg wanted to meet with the company's COO Sheryl Sandberg before making a decision. While employees' names were redacted in the court documents, their titles weren't.

Both Google and Facebook are under pressure for using anti-competitive methods. Google says that the lawsuit isn't accurate, and company spokesperson Peter Schottenfels said, "We sign hundreds of agreements every year that don't require CEO approval, and this was no different. And contrary to AG Paxton's claims, the fact of this agreement was never a secret — it was well-publicized. It simply enables FAN [Facebook Audience Network] and the advertisers it represents to participate in Open Bidding, just like over 25 other partners do."

Facebook's corporate parent Meta agreed with Google that the deal between the two tech giants did not call for Facebook to receive any particular advantages that other companies were not being given. "Meta’s non-exclusive bidding agreement with Google and the similar agreements we have with other bidding platforms, have helped to increase competition for ad placements," said Meta spokesperson Stephen Peters. "These business relationships enable Meta to deliver more value to advertisers while fairly compensating publishers, resulting in better outcomes for all."

As you might have expected, Google is planning to ask a judge to toss the case. Both Google and Facebook have been under fire from lawmakers for antitrust issues. Last summer, bills were introduced in Congress with lawmakers worried that firms like Google, Facebook, Amazon, and Apple were using their dominance in businesses like online shopping, search, and entertainment in order to crush their competition.

Additionally, Congress is concerned that these firms are making acquisitions that never should have received approval from antitrust regulatory agencies. As a result, there has been a call in Washington D.C. to force tech giants to break up into smaller companies.

Last year, the filing fees imposed on transactions valued at over $1 billion rose while the same fees for transactions valued at less than $500,000 would decrease. The idea is to give tech giants the incentive to purchase smaller firms instead of larger ones. In addition, the higher fees are expected to generate $135 million for antitrust enforcement agencies in its first year.